Dec 05 2014 : The Economic Times (Delhi)
India Deserves a Lot of Attention
Ulrich Spiesshofer sees India as an export hub
ABB global CEO Ulrich Spiesshofer, 50, is on a mission to change the way the global leader in power to automation does business. India is the largest engineering hub for ABB worldwide, with about 4,000 engineers and will play a key role in its future, he said in an interview to Satish John. Those employees include the 1,200 in its R&D centre, which ABB plans to leverage to tap markets in Africa and elsewhere for affordable micro power grids, locomotive technology and other segments, the German national said on a day in which the ABB India stock surged 20% before ending . 1,315.05, up 13%.at ` Spiesshofer, who is changing the organisational structure in ABB, is eyeing opportunities in India in locomotives and renewables as the country looks to modernise its electricity network and put in place infrastructure for smart cities.Edited excerpts:
ON INDIA EXPECTATIONS
There is a very large and strong home market. There are some underlying dynamics both in the power and automation side of our business which will allow us to participate in the market very strongly and I see India's role as an export hub. It will grow into the next level in the next couple of years. So altogether India deserves a lot of attention from our side.
ON OPPORTUNITIES IN POWER
ABB is into power and automation.There is a big shift that's happening in the generation side. In the future, one can expect much more activity from the renewables generation side. ABB has the strongest offering in solar energy.We'll continue to invest there.We've localised some of the activities and we're ideally placed in the segment. In the utilities space, we need to bring power to the consumption side. Renewables mean longer distances. We need to have low loss, higher distribution.
Look at the consumption side of it.Over 300 million Indians are without access to electricity . There are two options to reach electricity to them. It can be either through the conventional way or through micro-grids where you can take solar or wind energy and combine them with storage and distribute them.We are driving it very aggressively .
If you take agriculture, most countries consume about 2% of the electricity that is generated. In India, agriculture consumes more than 20%. This is only because of very inefficient irrigation systems. We have developed solar pumps in India, where we have solar panels and water pumps that exist close to each other and then you engage in irrigation in a much more responsible way. So for me, the utility sector, the electricity value chains are opportunities that are very demanding.
Another emerging opportunity is in the transportation and infrastructure space. The government is talking about setting up more than 100 smart cities. There is a lot of investment in transport.
ON PROSPECTS FOR AUTOMATION IN INDIA
If you take the situation of Indian manufacturing, it will compete against other manufacturing regions of the world. India is not only about cheap labour cost... it's about quality and about accuracy . The coexistence of affordable labour cost and high-level automation can position India in a very strong way in the manufacturing world. So my advice to customers is don't bank on cheap labour cost only . But if you combine affordable labour cost with smart levels of automation, then you get better quality output and good productivity and then you can really differentiate. So automation and labour need to go hand in hand and not replace each other.
ON CONTRIBUTION OF INDIA R&D
We have hired more than 4,000 engineers in India. Of these, 1,200 are in R&D and the rest in engineering.That makes India the largest engineering hub for ABB worldwide.
The role of R&D in India for ABB worldwide has changed fundamentally. In the past, it was an extended workbench. But today we are leading key projects all around the world with Indian teams. So we are proud of what the team has achieved here. I spent Tuesday afternoon with different R&D teams and we now have fully capable, fully empowered local R&D teams. It can not only work for India but for key projects worldwide. We'll continue investing here.
What I am particularly proud of is that it has one of the lowest turnovers in R&D in India. It is because we are combining the short-term opportunity to long-term people development.
ON PARTNERSHIPS, ACQUISITIONS
Here in India, I met many customers and companies that may be potential partners. I'm putting in a new organisation for ABB as of Ja nuary 1. But you'll see us make acqui sitions in the next few years again.
There's no doubt about that. The partnership ap proach is the way to drive growth. In l echnology converg a world where technology converges more and more, it is important that we stay focused and identify complementary partners where both partners are benefited.
We want to outgrow competition and for this we'll focus on strong organic growth, targeted acquisitions and more partnerships in the times to come.
ON POTENTIAL FOR SMART GRIDS
If you take the smart grid situation here, there's a demand-driven pull and a supply-driven push to develop market capabilities. The move by India to move towards renewable energy will increase the complexity of the grid. It will be more volatile and less predictable and longer distances and many more feeding points than in the past.
So to control that grid you need to put in some very smart technologies to make sure you've a reliable grid. So the next phase of smart grid development will be driven a lot by raising complexity in the generation side and less so from the consumer perspective. We are working on consumer savings but the big change will come from the generation side.
ON GROWTH POTENTIAL OF INDIAN LISTED ENTITY
Today , we have a 75% shareholding in the Indian listed subsidiary . The focus is to profitably grow this business. So if you look at the underlying growth drivers of this country and ABB's technology position, there's no reason to be not optimistic for the long term. But we need a predictable reliable economic environment where the government policies that are on the horizon are put into reality and actions are taken in light of those policies.
We see an increased appetite for potential investment but we need to see the investments and see money flowing into the projects so that we are convinced that this is going in the right direction. We listen in to what the customer hears and we have patience and perseverance to get it going.
ON HIS MESSAGE TO ABB INDIA'S MINORITY SHAREHOLDERS
For the shareholder in India, ABB is a very attractive long-term investment. Look at the years to come, we are well-positioned to take advantage of the market potential. We have a strong technology base, a strong brand. We are investing continually in competitiveness.
ON INDIA SCALING UP
Besides numbers, there is other way to look at business. For me, India is a highly strategic, relevant piece of the ABB portfolio. The local market, the export capability and the global capability are the key elements that can differentiate India very strongly. There is a coexistence of the ABB portfolio... We have a strong China, a strong India... We are changing the organisational structure of ABB. We are putting three new regions -Europe, America and AsiaMiddle East-Africa. I really believe in the axis between Asia, Middle East and Africa. There's a fantastic opportunity in the future. The competition in Africa will be won, enabled by Indian and Chinese resources. We need to make sure that we compete that way... We won't try to penetrate Africa from Europe...we'll try to penetrate from our Asian outposts.
ON INDIA STARTUPS
Let us talk about software. India deployed a lot of resources for software for financial services and insurance business. We see some activity there. That's why we are picking up maybe one of the companies or teams.
We will also be partnering with some small local teams or university departments. So in industrial software there are tremendous opportunities to work together with the Indian workforce and Indian software and also with large-scale players in India.
ON INDIA EXPECTATIONS
There is a very large and strong home market. There are some underlying dynamics both in the power and automation side of our business which will allow us to participate in the market very strongly and I see India's role as an export hub. It will grow into the next level in the next couple of years. So altogether India deserves a lot of attention from our side.
ON OPPORTUNITIES IN POWER
ABB is into power and automation.There is a big shift that's happening in the generation side. In the future, one can expect much more activity from the renewables generation side. ABB has the strongest offering in solar energy.We'll continue to invest there.We've localised some of the activities and we're ideally placed in the segment. In the utilities space, we need to bring power to the consumption side. Renewables mean longer distances. We need to have low loss, higher distribution.
Look at the consumption side of it.Over 300 million Indians are without access to electricity . There are two options to reach electricity to them. It can be either through the conventional way or through micro-grids where you can take solar or wind energy and combine them with storage and distribute them.We are driving it very aggressively .
If you take agriculture, most countries consume about 2% of the electricity that is generated. In India, agriculture consumes more than 20%. This is only because of very inefficient irrigation systems. We have developed solar pumps in India, where we have solar panels and water pumps that exist close to each other and then you engage in irrigation in a much more responsible way. So for me, the utility sector, the electricity value chains are opportunities that are very demanding.
Another emerging opportunity is in the transportation and infrastructure space. The government is talking about setting up more than 100 smart cities. There is a lot of investment in transport.
ON PROSPECTS FOR AUTOMATION IN INDIA
If you take the situation of Indian manufacturing, it will compete against other manufacturing regions of the world. India is not only about cheap labour cost... it's about quality and about accuracy . The coexistence of affordable labour cost and high-level automation can position India in a very strong way in the manufacturing world. So my advice to customers is don't bank on cheap labour cost only . But if you combine affordable labour cost with smart levels of automation, then you get better quality output and good productivity and then you can really differentiate. So automation and labour need to go hand in hand and not replace each other.
ON CONTRIBUTION OF INDIA R&D
We have hired more than 4,000 engineers in India. Of these, 1,200 are in R&D and the rest in engineering.That makes India the largest engineering hub for ABB worldwide.
The role of R&D in India for ABB worldwide has changed fundamentally. In the past, it was an extended workbench. But today we are leading key projects all around the world with Indian teams. So we are proud of what the team has achieved here. I spent Tuesday afternoon with different R&D teams and we now have fully capable, fully empowered local R&D teams. It can not only work for India but for key projects worldwide. We'll continue investing here.
What I am particularly proud of is that it has one of the lowest turnovers in R&D in India. It is because we are combining the short-term opportunity to long-term people development.
ON PARTNERSHIPS, ACQUISITIONS
Here in India, I met many customers and companies that may be potential partners. I'm putting in a new organisation for ABB as of Ja nuary 1. But you'll see us make acqui sitions in the next few years again.
There's no doubt about that. The partnership ap proach is the way to drive growth. In l echnology converg a world where technology converges more and more, it is important that we stay focused and identify complementary partners where both partners are benefited.
We want to outgrow competition and for this we'll focus on strong organic growth, targeted acquisitions and more partnerships in the times to come.
ON POTENTIAL FOR SMART GRIDS
If you take the smart grid situation here, there's a demand-driven pull and a supply-driven push to develop market capabilities. The move by India to move towards renewable energy will increase the complexity of the grid. It will be more volatile and less predictable and longer distances and many more feeding points than in the past.
So to control that grid you need to put in some very smart technologies to make sure you've a reliable grid. So the next phase of smart grid development will be driven a lot by raising complexity in the generation side and less so from the consumer perspective. We are working on consumer savings but the big change will come from the generation side.
ON GROWTH POTENTIAL OF INDIAN LISTED ENTITY
Today , we have a 75% shareholding in the Indian listed subsidiary . The focus is to profitably grow this business. So if you look at the underlying growth drivers of this country and ABB's technology position, there's no reason to be not optimistic for the long term. But we need a predictable reliable economic environment where the government policies that are on the horizon are put into reality and actions are taken in light of those policies.
We see an increased appetite for potential investment but we need to see the investments and see money flowing into the projects so that we are convinced that this is going in the right direction. We listen in to what the customer hears and we have patience and perseverance to get it going.
ON HIS MESSAGE TO ABB INDIA'S MINORITY SHAREHOLDERS
For the shareholder in India, ABB is a very attractive long-term investment. Look at the years to come, we are well-positioned to take advantage of the market potential. We have a strong technology base, a strong brand. We are investing continually in competitiveness.
ON INDIA SCALING UP
Besides numbers, there is other way to look at business. For me, India is a highly strategic, relevant piece of the ABB portfolio. The local market, the export capability and the global capability are the key elements that can differentiate India very strongly. There is a coexistence of the ABB portfolio... We have a strong China, a strong India... We are changing the organisational structure of ABB. We are putting three new regions -Europe, America and AsiaMiddle East-Africa. I really believe in the axis between Asia, Middle East and Africa. There's a fantastic opportunity in the future. The competition in Africa will be won, enabled by Indian and Chinese resources. We need to make sure that we compete that way... We won't try to penetrate Africa from Europe...we'll try to penetrate from our Asian outposts.
ON INDIA STARTUPS
Let us talk about software. India deployed a lot of resources for software for financial services and insurance business. We see some activity there. That's why we are picking up maybe one of the companies or teams.
We will also be partnering with some small local teams or university departments. So in industrial software there are tremendous opportunities to work together with the Indian workforce and Indian software and also with large-scale players in India.
